Gold To Fall Toward $1,950, $1,940 On Hawkish Fed

Gold has reversed its direction after rallying toward new all-time highs. The precious metal is set to extend its downward correction on a hawkish US Federal Reserve.

The Fed is widely expected to kick off its tightening cycle with a 25 basis points rate hike when the two-day FOMC policy meeting concludes on Wednesday, 16 March.

US Treasury bond yields should continue to push higher on a hawkish policy outlook and weigh on gold. On the flip side, a dovish surprise, which is the less likely scenario, could cause bond yields to turn south and trigger a leg higher in XAU/USD.

On Thursday, the Bank of England (BoE) will announce its policy decisions as well. In case GBP/USD rises after the BoE event, the selling pressure surrounding the dollar could help the Gold Index edge higher and vice versa.

Investors will continue to pay close attention to geopolitical headlines. Gold has been one of the most sensitive assets to changes in risk mood and it is likely to continue to find demand if tensions continue to escalate.

With a daily close below $1,950 (Fibonacci 38.2% retracement), XAU/USD could test the ascending trend line at $1,940. On the upside, $1,990 (Fibonacci 23.6% retracement) aligns as first technical resistance before $2,000 (psychological level) and $2,010 (static level).